Earlier today in a report entitled “UK gambling stocks drop after U.S. DOJ reverses opinion on internet betting”, Reuters reported on the U.S. Department of Justice (DoJ) Opinion memorandum from the Office of Legal Counsel (“OLC”) dated 2 November 2018, reversing its previous (2011) interpretation of section 1084(a) of the Federal Wire Act, that reads as follows (with the crucial words marked in red):
“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”
The 2011 Opinion (that can be downloaded below) concluded that the effect of the above wording was that the Wire Act applies solely to betting on sporting events or contests. The new 2018 Opinion published yesterday (that can also be downloaded below) concludes that:
- the Wire Act is not limited to such betting but instead applies to all forms of wagering (i.e. gambling),
- solely the prohibition on transmitting “information assisting on the placing of bets or wagers on any sporting event or contest” is limited to betting on sporting events or contests, and
- section 1084(a) of the Wire Act has not been modified by the Unlawful Gaming Enforcement Act (“UIGEA”).
Explaining the reversal of the previous Opinion, Assistant Attorney General for the OLC, Stephen Engel, has said:
Our 2011 Opinion concluded that this clause was ambiguous on whether the sports gambling modifier applies to both prohibitions in the first clause. We reasoned that the text itself can be read either way because section 1084(a) lacks a comma after the first reference to ‘bets or wagers’; we though that such a comma would have made it plausible that the first prohibition in the first clause was not limited to sports-based gambling.
The Coalition to Stop Internet Gambling (a lobbying group formed by Las Vegas Sands CEO Sheldon Adelson, one of the Republican Party’s largest donors) has welcomed the new Opinion, stating:
CSIG is pleased to see today’s decision by the Department of Justice to reverse an Office of Legal Counsel opinion that was as problematic legally as it was morally.
Today’s decision seamlessly aligns with the Department’s longstanding position that federal law prohibits all forms of internet gambling, as well as with Congress’s intent when it gave law enforcement additional tools to shut down the activity through the overwhelmingly-passed Unlawful Internet Gambling Enforcement Act in 2006.
Citing a variety of sensationalist reports in UK media, it goes on to say:
Countries around the world offer a perilous preview of where our nation was headed absent today’s action from the federal government. In the UK – which is the epicenter of the epidemic as ‘the world’s largest regulated online gambling market‘ – ‘over half of 16-year-olds have gambling apps on their smartphones.’ Further, the iGaming industry obtains more than half of its profit from problem gamblers. Children’s social media feeds are being ‘bombarded‘ with online gambling ads and vulnerable problem gamblers are being baited back with aggressive promotional offers. Meanwhile, following the fateful OLC decision, licensed operators began emulating their overseas counterparts in the worst possible way here in the United States. For instance, earlier this year, ads for internet casinos were spotted on websites for kids and online resources for problem gamblers seeking help.
A contrary view was expressed by Kate Lowenhar-Fisher of Las Vegas law firm Dickinson Wright when she described the new Opinion as:
….. a tortured effort to interpret the Wire Act to include all forms of betting. It was an absurd grammatical exercise.
As matters now stand, whilst the 2018 Opinion supersedes and replaces the 2011 Opinion, it expressly acknowledges that ultimately whether its fresh determination on the issue is correct will ultimately be a matter for the courts. Until then, confusion will reign on what is and what is not lawful pursuant to an Act that came into force as long ago as 1961 in terms of sharing liquidity across State lines.
1 As reported by iGaming Business:
- on 18 February 2019 under the heading “New Hampshire challenges DOJ Wire Act opinion” and
- on 25 March 2019 under the heading “DOJ files motion to dismiss NH Wire Act challenge”
a lawsuit has been filed on behalf of the New Hampshire Lottery Commission challenging the above-mentioned 2018 opinion on the Wire Act, arguing that the new stance is not faithful to the text, structure, purpose, or legislative history of the legislation. However, the DoJ has filed a motion to dismiss the case, on the basis that there is no case to answer.
2 In further developments:
- as reported by iGaming Business on 8 April 2019 under the heading “Lotteries not impacted by Wire Act opinion, DoJ claims”, the DoJ filed a memo stating that its 2018 opinion did not address the question of state lotteries and, pending a decision in that respect, federal prosecutors had been advised not to enforce the November opinion until a decision was made; it requested further time to determine whether the Wire Act applied;
- on 11 April 2019, Judge Paul Barbadoro, a federal court judge, imposed a time limit of two weeks for the DoJ to clarify its stance on laws regulating internet gambling, following which it is anticipated that the judge will rule on the lawsuit filed by the New Hampshire Lottery Commission. A blow by blow account of the oral hearing before Judge Paul Barbadoro is reported in Online Poker Report here;
- as reported by iGaming Business on 8 May 2019 under the heading “New Jersey sues DoJ over Wire Act FOIA request“, the State of New Jersey has filed a lawsuit against the DoJ, after it failed to respond to a Freedom of Information Act demand for documentation related to its revised interpretation of the Wire Act, that would prove or disprove reported suggestions that the decision was taken following intensive lobbying efforts by Sheldon Adelson. Adelson is the founder, chair and CEO of the Las Vegas Sands Corporation, a casino and resort company based in Nevada. He has long been a critic of the expansion of online gaming in the U.S. and has invested heavily in lobbying against the online gaming industry. iGaming Business reports that “the new lawsuit points out despite a claim by DoJ that “unusual circumstances” surrounded the New Jersey request, the DoJ is yet to explain what this actually means”.
3 On 3 June 2019, the New Hampshire District Court issued its formal ruling in favour of the New Hampshire Lottery Commission, namely that “§1084(a) of the Wire Act, 18 U.S.C. § 1084(a), applies only to transmissions related to bets or wagers on a sporting event or contest. The 2018 OLC Opinion is set aside”. You can read our report (and download a copy of the Court ruling) here.